BEIJING (Reuters) – Beijing could tighten the management of house purchase payments held in escrow to ensure funds are only used on real estate projects, according to the draft policy released on Thursday.
A debt crisis at the China Evergrande Group, once the country’s top-selling developer, has rocked the sector, which is facing a liquidity crisis.
Chinese developers can sell residential projects before construction, but must put funds in escrow accounts that are overseen by local regulators.
Under the proposed new rules, developers will not be allowed to get funds back if their projects have quality issues, are not delivered on time, or are in violation of the law.
Home buyers would not be allowed to sign a contract with the developer until they have deposited the full down payment in escrow accounts, according to the draft ruling posted on the Beijing Local Housing Authority’s website.
Growth in China’s real estate market has slowed this year as tough measures such as credit restrictions, house price caps and restrictions on land sales have cooled the sector.
Chinese real estate developer Kaisa Group Holdings Ltd said Thursday that its finance department missed a payment for an asset management product (WMP), adding to concerns about a liquidity crisis at the debt-ridden company.
(Reporting by Liangping Gao and Ryan Woo, editing by Alexandra Hudson)